The elite London law firm Mishcon de Reya and Arron Banks’ pro-Brexit Leave.EU campaign have parted ways in the midst of Leave.EU’s legal challenge to a ruling it broke electoral law, the Guardian has learned.

In June, the firm helped launch the campaign’s appeal against the ruling, but Banks told the Guardian the case was now being handled by Leave.EU’s in-house lawyers.

Banks, who in recent weeks has faced fresh scrutiny over payments to a government minister in Lesotho, said: “From a costs point of view, our internal lawyers know the case extremely well because they’ve obviously been making representations to the Electoral Commission.” He added: “We’ve just taken it over.”

A spokesperson for Mishcon de Reya confirmed the firm was no longer acting for Leave.EU but declined to comment on how the relationship had ended. She said Mishcon de Reya has “no current instructions” from either Leave.EU or Banks.

Mishcon de Reya, which specialises in libel law and “reputation management”, has advised Banks on media and defamation matters in recent years, a fact which Leave.EU has promoted on social media.

In an email, Andy Wigmore, Leave.EU’s communications director and a close associate of Banks, said the group had used Mishcon de Reya for certain cases, such as libel, and instruct the firm “as and when needed”.

However, the Guardian understands Banks and Wigmore have not instructed the firm to represent them against defamation allegations brought in June by lawyers representing journalist Peter Jukes and news website Byline. Neither Banks nor Wigmore responded to questions about why they have not been instructed.

As a Mishcon de Reya client, Banks has been represented by one of the firm’s most senior lawyers, Anthony Julius.

PEN has come under pressure to cut its ties to both Julius and Mishcon de Reya after protests by the family of the murdered journalist Daphne Caruana Galizia, who received letters from the law firm shortly before her death in 2017.

Mishcon de Reyas work for Leave.EU has been thrust into public view in recent months.

In June, the firm wrote to the European Parliament’s Brexit spokesman, Guy Verhofstadt, and asked the MEP to delete a tweet in which he said Banks had colluded with Russians to “deliver” Brexit. “We are instructed that the allegations are false,” read Mishcon de Reya’s letter, dated 13 June.

Leave.EU publicised Mishcon de Reya’s letter on its website and asked supporters to “help us get Euromeddler Guy Verhofstadt locked up”. A webpage – which included a photoshopped image of Verhofstadt behind bars and solicited donations – said the MEP “could soon find himself on the wrong side of a European arrest warrant”.

In an email, Wigmore did not answer a question about whether the fundraising effort was intended to pay for Mishcon de Reya’s fees: “We don’t and won’t give you a running commentary on our legal activities,” he wrote.

Mishcon de Reya’s work for Banks on libel claims appears to have run in parallel to the firm’s work for Leave.EU as it appeals the Electoral Commission ruling. Court documents filed at the Central London county court, dated 12 June, show Mishcon de Reya listed as the campaign’s solicitors.

The Electoral Commission found Leave.EU had reported receiving loans from Banks that were in fact provided by Rock Services Limited, one of his companies, “acting as a proxy or third party”.

In its appeal papers Leave.EU says written loan agreements were drawn up between Banks and Leave.EU. “The fact that Mr Banks himself obtained the funds for those loans from his company, Rock Services Limited, is irrelevant to the loan agreements in question, both as a matter of fact and for the purposes of the reporting obligations,” the papers argue.

Asked why Leave.EU parted ways with Mishcon, Banks told the Guardian: “I think [Mishcon de Reya] had done most of the work and we’re just going to run it.”

Mishcon de Reya is better known for representing the opposite side in the Brexit debate.

In 2016, the firm represented anti-Brexit campaigner Gina Miller in her successful challenge to the government’s position on triggering Article 50. The supreme court ruled parliament had to approve triggering Article 50 in what has been described as one of the most significant constitutional cases in UK legal history.